Confusion reigns over xenon demand

Following ongoing concerns regarding the raging demand for helium and insufficient supplies, it appears that market concerns are arising for the supply and cost of xenon as a sharp rise in demand is experienced in Japan – according to a report from The Gas Review.

Xenon is experiencing a sharp rise in demand in Japan for use in the semiconductor and PDP sectors. While this is naturally a good thing for the industry, shadows of gloom are, however, being cast on two extremely important issues in the market for 2008 – securing both the supply required and an agreeable price.

Japanese suppliers are going ahead with wholesaler negotiations regarding supply for 2008 but the issues of quantity and cost are yet to arrive at any conclusion. This is thought to be largely due to the fact that the gas majors cannot envisage what the global market will look like in the forthcoming year and cannot decide upon a supply ratio for each country and the price.

Reflecting on the situation, Japanese rare gas suppliers are believed to have emerged with such statements as, “We probably won’t be able to hold of the amounts we need.” Similarly, when commenting on the subject of prices the vast majority of the gas majors are quoted as having coming out with such statements as, “A doubling is certain. The envisaged range is 3-4 times higher.”

In terms of the amount of xenon distributed in the Japanese market, over 95% of this is imported from gas companies overseas, with the exception of that produced in-house by Air Water. Contracts for the year from January to December are usually renewed in early autumn of the year before, however the negotiations of 2007 did not appear to be progressing as well as in previous years. A plausible reason for this is that large scale plants supplying crude gas, such as Sasol in South Africa and Sabic in Saudi Arabia, had been hit by explosions and fires causing the global supply and demand balance to break down considerably.

When an incident occurred at the Sasol plant in June 2007, Air Liquide immediately resorted to the Force Majeure clause in its contract and implemented supply restrictions of 30-50% to customers and affiliates worldwide. While this has since been relaxed, Praxair and Air Liquide – which had been procuring from Air Liquide on a non-ordinary basis – did not obtain sufficient supply quantities and a global supply shortage erupted.

East Asian scrambleAnother aspect of concern is the East Asian market, and Japan in particular. These markets showed a sharp growth in the demand for xenon and in the plasma CVD process in semiconductor fabrication, when it comes to state-of-the-art line-width under 65nm, xenon is required for the nitride film plasma.

Elpida Memory currently consumes an annual 600,000 litres and the Toshiba plant in Yokkaichi uses 360,000 litres, though Toshiba will be extending this to a massive 1.8 million litres. Added to this, Micron Japan began to use xenon in the summer of 2007 and there had been reports of Rexchip Semiconductor Corporation (a joint venture between Elpida Memory and Powerchip Semiconductor) in Taiwan wanting to obtain 600,000 litres. Meanwhile in Korea, Samsung Electronics is heading towards full-scale use and has been sounding out suppliers for obtaining the inert noble gas.

Elsewhere in the market, Air Products – which has the gas merchant rights regarding Micron – had purchased 200-300,000 litres of Russian xenon produced by Iceblick, Air Liquide and Linde are locked in a tug of war over xenon anaesthesia which has reached an annual 1 million litre market in Europe, and in Japan the view is that Tokyo University will give rise to a new, larger demand for xenon in its space research.

The fact that the major gas companies had not been able to analyse the future demand and market climate thoroughly, is cited as the major reason for the lack of any progress in the negotiations last year. Masakazu Tanaka, manager for sourcing at Japan Air Gases (JAG), explained the situation when saying, “Procuring rare gases is most certainly very hard worldwide. Gas producers and distributors from various countries are going to Russia to buy, so that the price of the products is sky-rocketing.”

As of the end of December 2007, negotiations were expected to be resolved as Japanese users and distributors entered the final phase of talks, while there had already been some clarity achieved in the Russian market where the price has already increased to $20 per litre.

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